NewLake Capital Partners, Inc. (OTCQX: NLCP) Webcast | Planet MicroCap Showcase: TORONTO 2025
Summary
US Cannabis: The guest highlights a $100B U.S. cannabis market with only ~one-third legal, ongoing state-level expansion, and strong public support for legalization driving long-term growth.
Cannabis REITs: He pitches a triple-net lease cannabis REIT model with 12.7% average cap rates, long 13-year lease durations, and dividend growth underpinned by strong free cash flow.
Ticker Highlight: NewLake Capital Partners (NLCP) is presented as undervalued with a ~13% covered dividend yield, net cash balance sheet, and constraints from OTC listing and custody that create an opportunity.
Limited-license states: Strategy focuses on states with constrained license counts (e.g., PA, IL, OH) to support better margins, stronger tenant cash flows, and intrinsic license value that mitigates default risk.
Rescheduling catalyst: Expected DEA move to Schedule 3 could remove 280E, improve tenant cash flows, pave the way for SAFE Banking, exchange uplisting, and broader institutional participation.
Key companies: Portfolio tenants Curaleaf, Cresco Labs, and Trulieve are cited as leading operators showing profitability and cash generation, supporting rent durability.
Risks and opportunities: Federal illegality and regulatory uncertainty persist, but investors may collect high yield while awaiting catalysts; low leverage provides flexibility to add prudent debt for quality growth.
Transcript
Good morning, but it's actually good afternoon now. My name is Anthony Keniglia. I'm the CEO of New Lake Capital Partners. Um, and my challenge here today is twofold. One is I have to stand still for the microphone. I like to move around. So, if I if I stray, just remind me to come back. Number two, I'm fighting that post lunch lull and and sleepiness that you're going to have. So, I'm going to try to bring the energy. I had the nods in the front. I'm going to try to bring the energy for this. Um, so again, my name is Anthony Kiglio, founder and CEO New Capital Partners. We are the second largest owner of cannabis real estate in the United States. And I'm going to walk you through our business today. Um, first I'm going to read you our safe harbor statement. I'm just kidding. I'm not. You can read it on your own. We'll use up the entire half hour. Um, I'll talk about our team. I'll talk about what we're focused on. I'll talk about the growth dynamics of the industry and our financial position. And hopefully at the end of the presentation, you'll have a better sense for our business, better sense for the strength of our um our profit and the free cash flow that we generate and the quality of the dividend that we pay to our investors on a quarterly basis. Um some numbers, as I said, second largest in the United States focused on cannabis. We have 34 properties across 12 states um with 12 tenants. And when I when I say cannabis real estate, I want you to think about industrial buildings on the cultivation side. We don't own any fields. We don't own any farms. On the cultivation side, we have 15 properties that are typically uh 50 to 100,000 square foot industrial buildings that have been retrofitted with security, HVAC, and water capacity for indoor cultivation. We also have a significant number of dispensaries. We have 19 dispensaries in our portfolio. Those are the retail outlets for cannabis distribution in the United States. Um, we've deployed just short of a half a billion dollars into those 34 properties. We have a long duration. Um, so we're real estate investment trust. I should pause there and and as a real estate investment trust, we're required to pay out a dividend. Um, and there are a number of different types of REITs you can have. You could have a mortgage re, you could have an equity REIT. We are a triple net lease equity rate. What that means is we own our properties and we lease them out on a long-term basis. different than some mortgage rates where they're shorter duration where they lend against the value of the real estate and typically it's a loan term. It's two to threeyear duration but for us as you could see the weighted average I love that they gave a pointer there. There we go. I'm going to have fun with this one. Weighted average yield of um nearly 13% but you have nearly 13 years of duration. And so this yield of 12.7% think of that as the cap rate. So that's the average cap rate we're getting today on our investments. Um whereas the typical real estate in the United States, the cap rate for retail could be anywhere from 4 to 6% and for industrial could be anywhere from 6 to 8%. So we are definitely getting a 4 to 500 basis point premium to what you'd see for non-cannabis real estate. And we're getting that premium for a very long period of time. I'd also point out our very low um uh expense ratios. We're a small team. These transactions um are are in some form set it and forget it. We don't operate the properties as a triple net lease rate. What triple net means is that all of the operational expenses and responsibilities um are borne by the operator themselves or the tenant themselves. So we don't need a large team to service the properties, to clean the properties, plow the plow the parking lots. That's taken care of entirely by the tenant base. Um, we've grown our dividend aggressively since our IPO. You'll we'll show you a slide where we've stabilized a bit, but significant growth in the uh dividend and significant coverage for a dividend, which I'll get into. Everybody talks about their management teams. What I want to impress upon you here is that it's a complimentary mix of what I would call table stakes capabilities, right? Obviously, you need to have people who understand real estate. It's the business we're in. But it's a complimentary set of real estate, cannabis, regulatory, um, and, uh, financial services, most importantly, restructuring. Um, you know, I want to point out a couple of people on our board. Gordon Dugan, our chairman, has over three decades in commercial real estate. Used to be the CEO of WP Carry. WP Carry being one of the largest net lease rates in the world. He took over Grammarcy Property Trust when it was about 300 million, scaled it up to 7.6 six billion and sold it to Blackstone back in 2018. So decades of commercial real estate experience. Alan Carr and Joyce Johnson bring decades of not only financial services but also restructuring and work experience. Why that was important when we were constructing our board is because we knew that the United States cannabis industry was not going to be on a straight line to success that it was going to have to have inevitable es and flows and we were going to find that uh the tenant base would be in difficulty. And so as that's come true, unfortunately over the last two years, we've really called upon their expertise. Um, and Dena Roman in the middle here worked for a decade, was one of the co-founders uh originally at Green Thumb Industries, one of the leading cannabis companies in the world, also the US obviously, but in the world um and a lot of regulatory experience. And that's really important as we look at navigating the evolution of the regulatory environment in the US where I should just level set us all and say it is still a schedule one drug in the US. It is still federally illegal. Um and we still have this construct of a myriad of state licensing requirements and regulatory requirements to navigate. So let's talk a little bit about on about the industry. It has been a significant grower over the last 5 years. When we think about the cannabis industry in the United States, we think of it as over a hundred billion dollar industry. So, let me just say that again. A hundred billion dollar industry, but only roughly a third is in what we call the state legal industry. That is the market that we focus on. And over twothirds, is in the illicit industry. And so, the play in the United States, much like you've had here in Canada, is transitioning the consumer from the illicit market into the legal market. and we've seen significant growth um to date, but we also think we're going to continue to see Whoops. We're going to continue to see growth um from new states issuing medical marijuana licenses. As an example, Kentucky only last year approved medical marijuana. Earlier this year, they started issuing licenses and that industry is expected to see their first sales later this year. We'll also see limit limited medical states expanding their program. An example there is Texas, 33 million um population in Texas, only about 17,000 to 20,000 patients. That is a minuscule portion because that that program was very restrictive. Well, this past summer, the state passed a revision to the medical marijuana laws. They're issuing 15 more licenses and expanding the program significantly. So, we expect to see growth out of Texas. And then there's this conversion of medical markets into adult use. We have Pennsylvania right now is debating converting from a medical market to adult use. Same thing for Florida. Unfortunately, it failed at the ballot box in November by just three points. They needed 60% approval. They only achieved 57%. That'll come back up again. So, we've had an industry that's been growing and we see catalysts for continued growth in the industry. Part of what's fueling that growth um and since we're in Canada, many of you may have seen this story before uh play out in your country here. Uh what's fueling that growth is what we call the replacement trade. We're seeing a younger cohort replace al alcohol with cannabis related products. Um and when you listen to the earnings calls of a number of the alcohol and beer companies, you'll actually see that not only your sales coming down, but they're talking about alternative form factors and you're seeing a number of alcohol companies um take a look hard at some of the the drink business in the United States. give you some other numbers about the proliferation of cannabis programs in the US. Over half of our country in the US lives in a state that has a adult use program. So if you think about that, over half the country lives where you have an adult use program and yet it's still federally illegal on the same schedule as fentinol and cocaine. Um, and you have po you have polls that come out regularly from Pew and Gallup, which both demonstrate nearly 90% support for some level of legalization, medical or adult use, and over 2/3 support, roughly twothird support for adult use. Those are significant numbers in a country where we fight just about over everything um in the polls. And when you look at those pollings, even down into some of the specific demographics, just about every group um has majority support for legalization in cannabis. Let's talk about some of the catalysts. You've heard me mention that it continues to be federally legal in the US. Across all three branches of our government, we have action at the administrative level. The DEA has on file in the federal register a proposed rule to complete that rescheduling to uh schedule 3. It was initiated by the Biden administration and we're waiting for the Trump administration to uh uh to complete that process. So many people ask me where does President Trump stand on this topic. As a candidate last September he posted to Truth Social that he supported four things. Number one rescheduling to schedule three. Number two, he supported the states act that is allowing the states to decide if they want to have a medical cannabis program or an adult use program and getting the federal government out of their way. Number three, he supports uh the Safe Banking Act, which is an act uh that would provide greater access to the cannabis industry, to the US banking system. Uh and number four, he supported adult use on the ballot in Florida. He was a Florida resident. he had the opportunity to vote to allow adult use in Florida and he believes that flityians should have a choice. He said he was voting yes. Um most recently he tweeted out a uh tweeted he posted to Truth Social uh a video talking about the health benefits of the endockinabonoid system and uh espousing the benefits for seniors and then actually saying that perhaps Medicare should cover. That's pretty significant for um to have a US president talking positively about the industry. So we do expect that at some point we'll see followth through from the DEA or the DOJ to uh get this done to schedule three. On the legislative side, every legislative session we see introduction of numerous bills like the safer uh banking bill and the states act that I talked about. Also recently a few weeks ago, the more act was introduced by the Democrats. And then finally on the on the legal side, very interestingly, we all know around the world how Americans love their guns. Well, an issue has cropped up over crop, pun intended, has cropped up over the last, come on, and we got energy. Where's the energy? That was a good joke. I a lot of puns. Um, so this issue has come up where the federal government says it's illegal to consume or possess cannabis. Um, and so therefore they could take your your right to uh your second amendment right away right away from you and confiscate your gun. There have been a number of cases around the country with conflicting um rulings out of federal circuit courts and just Monday the Supreme Court in the US said that they will hear a case that and and weigh in on this issue of can a cannabis consumer, somebody that's complying with a state medical program as an example, be stripped of their Second Amendment rights. And so that could be a landmark decision for um for the US cannabis industry. you know, our portfolio. Um, as I said, we're in 12 states. I'd point you to our top three. We have some concentration. I point you to our top three tenants. Curleaf, Crescer, and True Leaf. These are some of the leading cannabis companies in the US and in some cases the world. Curleaf having a multinational presence. True Leaf posting $80 million of profit in the first quart in the second quarter. Uh, Cresco continuing to post profitability and free cash flow. um some of the lesserk known names in our portfolio that you may not be familiar with like a Mint or a Calypso um or a C3. Again, these are companies that are doing really well in the US cannabis industry. Let's talk about our portfolio for a moment and how we approach underwriting. I think if you were to compare us to there's one other net lease rate that's out there. If you were to compare us to them or some of the mortgage rates or for that matter any lender that focuses on the sector, I think what you'd find is that our portfolios perform better than anybody else. That's not just a qualitative assessment. I think you could also look at it quantitatively and you come with the same answer. And people keep asking me why is your portfolio holding up better during a difficult period for the US cannabis market than others. And I think it really comes down to these three tenants. And we do it a little differently. We're obviously looking at tenant quality. It's a real estate business. You have to get paid rent. So, you need to know they'll be there for the 15 years of the lease to pay you rent. When we look at tenant quality, it's not just the financials. It's looking at the management team, understanding their ability to raise capital, their ability to manage a growth business in a highly regulated market. And again, this isn't just federal regulation because that doesn't exist. It's different regulations on a state-by-state business. So if you're in five states, you have five different regulators that approach the industry very differently. Um so understanding their ability to navigate that, navigate it well, uh and drive profitability and cash flow. Cannabis market, another key aspect, we're not just looking at the market, we're deconstructing where it is in its evolution because we know as more competition comes into play, there'll be continued price compression which squeezes margins. In particular, we focus on what's called limited licensed states. So, as an example, if you were in California and you wanted to buy a bottle of vodka, you could go to a supermarket and buy wine or vodka. You're in Pennsylvania, you have to go to a staterun package store and you can only buy it at a limit limited number of locations. It's states like that that limit the number of licenses that we focus on. Think Pennsylvania, Illinois, Ohio to name a few. In these states, if you just think about it for a moment, if you have less competition, you should have better margin. you have better margin, you have better cash flow, it's a better credit profile for us to have the tenant. Number two, if you have a limited number of licenses, those licenses tend to I'm going to really pick it up because I want to get to Q&A. Those licenses tend to have, thank you for that, tend to have intrinsic value. So, if the operator is having difficulty, um they're unlikely to throw you the keys the way they would in say in California. We've seen a lot of defaults in the industry in California. Rather, they sell that business to be able to monetize the value of that license. And depending on the state, that license could have a value of anywhere from 1 million to 10 million. We saw a license a few years ago in New York State sell for $230 million for just a license. Granted, that was the peak. And then um lastly on this page, our full wall coverage. We focus on underwriting cash flow. I used to be a banker at JP Morgan and going into the great financial crisis, the team I ran, we had over $9 billion of credit risk on the books. I spent the next two years with the workout people. We didn't lose a penny on our book, but what I really learned is that the go-to move in financial distress for a CFO, rightly, is to cut off anything that's not generating free cash flow. And we've seen that in spades here in the cannabis industry. So, we really focus on underwriting the properties we're investing in to make sure that they'll be able to persist in providing cash flow to the tenants because if they're providing free cash flow to the tenants, there should be no reason for them uh to want to turn back the facility. I am going to skip over uh couple of points I'd like to make here. Our dividend yield, I haven't seen where we're trading in the last 48 hours. I've been traveling, but our dividend yield is running, this was 123, we're around 13%. Um, typical REITs trade at uh 6% dividend yield. So, a lot of people say, "Wait a minute, why are you trading at such a yield premium? Why are you at a 13% yield nearly two times what uh non-cannabis are trading at?" Typically, the investors say it means one of two problems. Either you have a leverage problem or you have a terrible portfolio. Let's talk about leverage. We have 7.6 million of debt outstanding um on a $446 million invested capital. We have a net cash position, 22 million of cash at the end of the last quarter minus the 7 million. So, we have a net cash position. We could pay off the debt tomorrow if we wanted to and still have cash left over. We're generating free cash flow every quarter by having a 79% payout ratio. Our payout ratio is the measure of our free cash flow that's used to cover our dividend. Said differently, on a 79% payout ratio, it means 21% of our revenue can go away and we can still cover paying the dividend of 43 cents a quarter. Um, and so it's not a it's not a debt problem on our uh on our business. So maybe it's a portfolio problem. Well, I just talked about our top three investors. I talked about the fact that we have 79% payout ratio. You know, one of our competitors is well over 100%. Well, now your dividend's really at risk. Um, so we could lose 20% of our portfolio and still cover the dividend. So, Anthony, if it's not the yield, excuse me, if it's not your debt and it's not your portfolio, then why the heck are you trading like this? We trade on the OTC. We comply in all respects to qualify for New York or NASDAQ listing, but we focus on the cannabis sector, so they won't list us. One of our competitors is grandfathered on the stock exchange. They they were listed before um before the rules changed. Uh so, it's a meaningful disadvantage. And if you're not on New York or NASDAQ and you focus on the cannabis sector, custody restrictions exist in the US. So prime brokers for for the hedge funds and all the long only investors think JP Morgan, Goldman Sachs, Persing, Bank of New York, they will not custody our stock. So that really puts a limit on the institutional bid for our stock. But there in lies the opportunity for those that can solve custody. We think you get paid a very handsome yield while you're waiting for the catalyst of federal reform to really allow us to get the uplifting um and resume the very rapid growth pace that we experienced um up until 2023. Let me pause there and open it up for questions. That's the most fun part of it. I see a hand moving. Yes. Can you say that again? just buildings. So, it's it's the um we're not doing any farmland. All of our buildings are industrial-grade buildings in the back. >> Yeah, that's one of the difficulties. We have no statements out of the new DEA administrator. Um, for those that don't know, the new DEA administrator was uh confirmed by the Senate in late July and started his job in late July. He's not come out and said anything or any position. In his testimony to the Senate in May, he said it would be one of his top priorities, but he's not made a uh a statement on it yet. We do. We do. We will. So, our deals are are primarily Thank you. our deals are primarily three types. Um, number one, we'll do a build to suit. We'll acquire the property for a tenant. Um, we enter into a long-term lease immediately and then we provide the funding for the construction of the building. We did that on a facility in Arizona in Phoenix, um, where we completed a $15 million project about a year ago. The second way we do it is we'll buy an existing building and we'll provide TI for a retrofit. Um, and we've done that before. We we're doing two deals right now uh for dispensaries where they're existing buildings and they're being retrofitted to dispensaries. Um and then the third way is we'll buy a fully complete and operational building um one that's been up and running. We're seeing fewer of those today because most of the operators monetize their existing uh portfolio back in the 21 to 23 range. No, not it. But the do what I call the domino effect will all rescheduling rescheduling does two things. Let me start with what it doesn't do. It does not legalize it in the US. In the US we have a schedule of controlled substances when number one as I said is fentanyl cocaine. Number three would be Tylenol with codine. Doesn't mean anybody could just manufacture and sell Tylenol with codine. means you have to have a DEA license to do that. Will operators in the industry apply for a DEA license? I think that's going to be really difficult because very few are medical only. Most of them operate in states that also have adult use. So now you're on schedule 3. It also eliminates 280E. Within the Internal Revenue Code in the US, we actually say that you could sell fentanyl. You can Well, we don't say you could sell if you sell illegal drugs. If you sell drugs on a schedule illegally and it's on schedule one and two, doesn't say anything about below, just one and two, you can only deduct cost of goods sold. Um, you can't deduct interest expense and everything else. So, as a result, the US industry is paying effective tax rates of 50 to 60% depending on how you've organized your business. So moving to schedule three improves the future cash flow profile of the entire industry and improves the credit quality of our entire um book of business because all of our tenants get that improved cash flow. Let's get to your question about uplifting. Um what I think it does from a domino effect, you get rescheduling to three. I think the safer banking act is likely to then happen within the safer banking act. There'll be safe harbors for not just banks but also for exchanges. Once that safe harbor is in place, then that'll be the application we'll put in to uplist. And since we already operate the business to qualify, it'll be a matter of weeks would be the expectation. But you do need to to circle back. You do need the domino to fall to get safer banking passed. I'm not giving up any time here. Um let's talk a little bit about if you if you think of a question please raise your hand. This is my favorite but my most depressing slide and it's how we are against our peers both our equity reap peer as well as our um mortgage rate peers. Uh, this is a little bit dated now. Um, but I think we're very undervalued. Again, when I think about a 13% dividend yield with significant coverage, um, and the opportunity to to manage through any sort of additional uh, issues that are in the portfolio and at a 12.7% topline yield, we're not getting paid 400 to 500 basis points of premium over non-cannabis real estate because we're not taking risk. So, we will have issues in the portfolio. I think we're well paid for it and I think we've got the cushion in our AFO uh to be able to maintain that dividend um and and get that catalyst since we're trading so far below book. Really get that catalyst um uh passed in terms of rescheduling and then safer banking and uplisting and be able to ride the wave back up. in the back. I would love to. And you probably don't hear a lot of people saying, "I'd love to put debt on." We're unlevered. We're under um you know, putting my banker my banker hat on. We're underutilizing debt. We're over capitalized. And from a capital efficiency perspective, we should be using the lower cost capital debt to scale up the business and get better yield to our investors. I just need the quality opportunities to invest in. Anybody wants to go back and look at what I've been saying since we IPOed in 21, we're going to grow for quality growth, not for growth growth's sake. Our largest competitor has I think over 30% of their def their portfolio is defaulted. It's because in my opinion, they reached for growth. Um, and we were getting we were getting hit for it two three years ago. But I think the quality of our portfolio proves out that thesis. as opportunities present themselves, we'll use that to fund it. >> Yes. Yes. Zero interest in issuing that zero. Way too dilute. Would not do that. And I'm I'm a fairly large shareholder myself. Our board and our management team, and I've got to end it now. Board and management team uh represent about 6% of uh of the shares. And if you include some of the inside foundational shareholders, we're over a third of the shares. Thank you everybody. Have a great day.
NewLake Capital Partners, Inc. (OTCQX: NLCP) Webcast | Planet MicroCap Showcase: TORONTO 2025
Summary
Transcript
Good morning, but it's actually good afternoon now. My name is Anthony Keniglia. I'm the CEO of New Lake Capital Partners. Um, and my challenge here today is twofold. One is I have to stand still for the microphone. I like to move around. So, if I if I stray, just remind me to come back. Number two, I'm fighting that post lunch lull and and sleepiness that you're going to have. So, I'm going to try to bring the energy. I had the nods in the front. I'm going to try to bring the energy for this. Um, so again, my name is Anthony Kiglio, founder and CEO New Capital Partners. We are the second largest owner of cannabis real estate in the United States. And I'm going to walk you through our business today. Um, first I'm going to read you our safe harbor statement. I'm just kidding. I'm not. You can read it on your own. We'll use up the entire half hour. Um, I'll talk about our team. I'll talk about what we're focused on. I'll talk about the growth dynamics of the industry and our financial position. And hopefully at the end of the presentation, you'll have a better sense for our business, better sense for the strength of our um our profit and the free cash flow that we generate and the quality of the dividend that we pay to our investors on a quarterly basis. Um some numbers, as I said, second largest in the United States focused on cannabis. We have 34 properties across 12 states um with 12 tenants. And when I when I say cannabis real estate, I want you to think about industrial buildings on the cultivation side. We don't own any fields. We don't own any farms. On the cultivation side, we have 15 properties that are typically uh 50 to 100,000 square foot industrial buildings that have been retrofitted with security, HVAC, and water capacity for indoor cultivation. We also have a significant number of dispensaries. We have 19 dispensaries in our portfolio. Those are the retail outlets for cannabis distribution in the United States. Um, we've deployed just short of a half a billion dollars into those 34 properties. We have a long duration. Um, so we're real estate investment trust. I should pause there and and as a real estate investment trust, we're required to pay out a dividend. Um, and there are a number of different types of REITs you can have. You could have a mortgage re, you could have an equity REIT. We are a triple net lease equity rate. What that means is we own our properties and we lease them out on a long-term basis. different than some mortgage rates where they're shorter duration where they lend against the value of the real estate and typically it's a loan term. It's two to threeyear duration but for us as you could see the weighted average I love that they gave a pointer there. There we go. I'm going to have fun with this one. Weighted average yield of um nearly 13% but you have nearly 13 years of duration. And so this yield of 12.7% think of that as the cap rate. So that's the average cap rate we're getting today on our investments. Um whereas the typical real estate in the United States, the cap rate for retail could be anywhere from 4 to 6% and for industrial could be anywhere from 6 to 8%. So we are definitely getting a 4 to 500 basis point premium to what you'd see for non-cannabis real estate. And we're getting that premium for a very long period of time. I'd also point out our very low um uh expense ratios. We're a small team. These transactions um are are in some form set it and forget it. We don't operate the properties as a triple net lease rate. What triple net means is that all of the operational expenses and responsibilities um are borne by the operator themselves or the tenant themselves. So we don't need a large team to service the properties, to clean the properties, plow the plow the parking lots. That's taken care of entirely by the tenant base. Um, we've grown our dividend aggressively since our IPO. You'll we'll show you a slide where we've stabilized a bit, but significant growth in the uh dividend and significant coverage for a dividend, which I'll get into. Everybody talks about their management teams. What I want to impress upon you here is that it's a complimentary mix of what I would call table stakes capabilities, right? Obviously, you need to have people who understand real estate. It's the business we're in. But it's a complimentary set of real estate, cannabis, regulatory, um, and, uh, financial services, most importantly, restructuring. Um, you know, I want to point out a couple of people on our board. Gordon Dugan, our chairman, has over three decades in commercial real estate. Used to be the CEO of WP Carry. WP Carry being one of the largest net lease rates in the world. He took over Grammarcy Property Trust when it was about 300 million, scaled it up to 7.6 six billion and sold it to Blackstone back in 2018. So decades of commercial real estate experience. Alan Carr and Joyce Johnson bring decades of not only financial services but also restructuring and work experience. Why that was important when we were constructing our board is because we knew that the United States cannabis industry was not going to be on a straight line to success that it was going to have to have inevitable es and flows and we were going to find that uh the tenant base would be in difficulty. And so as that's come true, unfortunately over the last two years, we've really called upon their expertise. Um, and Dena Roman in the middle here worked for a decade, was one of the co-founders uh originally at Green Thumb Industries, one of the leading cannabis companies in the world, also the US obviously, but in the world um and a lot of regulatory experience. And that's really important as we look at navigating the evolution of the regulatory environment in the US where I should just level set us all and say it is still a schedule one drug in the US. It is still federally illegal. Um and we still have this construct of a myriad of state licensing requirements and regulatory requirements to navigate. So let's talk a little bit about on about the industry. It has been a significant grower over the last 5 years. When we think about the cannabis industry in the United States, we think of it as over a hundred billion dollar industry. So, let me just say that again. A hundred billion dollar industry, but only roughly a third is in what we call the state legal industry. That is the market that we focus on. And over twothirds, is in the illicit industry. And so, the play in the United States, much like you've had here in Canada, is transitioning the consumer from the illicit market into the legal market. and we've seen significant growth um to date, but we also think we're going to continue to see Whoops. We're going to continue to see growth um from new states issuing medical marijuana licenses. As an example, Kentucky only last year approved medical marijuana. Earlier this year, they started issuing licenses and that industry is expected to see their first sales later this year. We'll also see limit limited medical states expanding their program. An example there is Texas, 33 million um population in Texas, only about 17,000 to 20,000 patients. That is a minuscule portion because that that program was very restrictive. Well, this past summer, the state passed a revision to the medical marijuana laws. They're issuing 15 more licenses and expanding the program significantly. So, we expect to see growth out of Texas. And then there's this conversion of medical markets into adult use. We have Pennsylvania right now is debating converting from a medical market to adult use. Same thing for Florida. Unfortunately, it failed at the ballot box in November by just three points. They needed 60% approval. They only achieved 57%. That'll come back up again. So, we've had an industry that's been growing and we see catalysts for continued growth in the industry. Part of what's fueling that growth um and since we're in Canada, many of you may have seen this story before uh play out in your country here. Uh what's fueling that growth is what we call the replacement trade. We're seeing a younger cohort replace al alcohol with cannabis related products. Um and when you listen to the earnings calls of a number of the alcohol and beer companies, you'll actually see that not only your sales coming down, but they're talking about alternative form factors and you're seeing a number of alcohol companies um take a look hard at some of the the drink business in the United States. give you some other numbers about the proliferation of cannabis programs in the US. Over half of our country in the US lives in a state that has a adult use program. So if you think about that, over half the country lives where you have an adult use program and yet it's still federally illegal on the same schedule as fentinol and cocaine. Um, and you have po you have polls that come out regularly from Pew and Gallup, which both demonstrate nearly 90% support for some level of legalization, medical or adult use, and over 2/3 support, roughly twothird support for adult use. Those are significant numbers in a country where we fight just about over everything um in the polls. And when you look at those pollings, even down into some of the specific demographics, just about every group um has majority support for legalization in cannabis. Let's talk about some of the catalysts. You've heard me mention that it continues to be federally legal in the US. Across all three branches of our government, we have action at the administrative level. The DEA has on file in the federal register a proposed rule to complete that rescheduling to uh schedule 3. It was initiated by the Biden administration and we're waiting for the Trump administration to uh uh to complete that process. So many people ask me where does President Trump stand on this topic. As a candidate last September he posted to Truth Social that he supported four things. Number one rescheduling to schedule three. Number two, he supported the states act that is allowing the states to decide if they want to have a medical cannabis program or an adult use program and getting the federal government out of their way. Number three, he supports uh the Safe Banking Act, which is an act uh that would provide greater access to the cannabis industry, to the US banking system. Uh and number four, he supported adult use on the ballot in Florida. He was a Florida resident. he had the opportunity to vote to allow adult use in Florida and he believes that flityians should have a choice. He said he was voting yes. Um most recently he tweeted out a uh tweeted he posted to Truth Social uh a video talking about the health benefits of the endockinabonoid system and uh espousing the benefits for seniors and then actually saying that perhaps Medicare should cover. That's pretty significant for um to have a US president talking positively about the industry. So we do expect that at some point we'll see followth through from the DEA or the DOJ to uh get this done to schedule three. On the legislative side, every legislative session we see introduction of numerous bills like the safer uh banking bill and the states act that I talked about. Also recently a few weeks ago, the more act was introduced by the Democrats. And then finally on the on the legal side, very interestingly, we all know around the world how Americans love their guns. Well, an issue has cropped up over crop, pun intended, has cropped up over the last, come on, and we got energy. Where's the energy? That was a good joke. I a lot of puns. Um, so this issue has come up where the federal government says it's illegal to consume or possess cannabis. Um, and so therefore they could take your your right to uh your second amendment right away right away from you and confiscate your gun. There have been a number of cases around the country with conflicting um rulings out of federal circuit courts and just Monday the Supreme Court in the US said that they will hear a case that and and weigh in on this issue of can a cannabis consumer, somebody that's complying with a state medical program as an example, be stripped of their Second Amendment rights. And so that could be a landmark decision for um for the US cannabis industry. you know, our portfolio. Um, as I said, we're in 12 states. I'd point you to our top three. We have some concentration. I point you to our top three tenants. Curleaf, Crescer, and True Leaf. These are some of the leading cannabis companies in the US and in some cases the world. Curleaf having a multinational presence. True Leaf posting $80 million of profit in the first quart in the second quarter. Uh, Cresco continuing to post profitability and free cash flow. um some of the lesserk known names in our portfolio that you may not be familiar with like a Mint or a Calypso um or a C3. Again, these are companies that are doing really well in the US cannabis industry. Let's talk about our portfolio for a moment and how we approach underwriting. I think if you were to compare us to there's one other net lease rate that's out there. If you were to compare us to them or some of the mortgage rates or for that matter any lender that focuses on the sector, I think what you'd find is that our portfolios perform better than anybody else. That's not just a qualitative assessment. I think you could also look at it quantitatively and you come with the same answer. And people keep asking me why is your portfolio holding up better during a difficult period for the US cannabis market than others. And I think it really comes down to these three tenants. And we do it a little differently. We're obviously looking at tenant quality. It's a real estate business. You have to get paid rent. So, you need to know they'll be there for the 15 years of the lease to pay you rent. When we look at tenant quality, it's not just the financials. It's looking at the management team, understanding their ability to raise capital, their ability to manage a growth business in a highly regulated market. And again, this isn't just federal regulation because that doesn't exist. It's different regulations on a state-by-state business. So if you're in five states, you have five different regulators that approach the industry very differently. Um so understanding their ability to navigate that, navigate it well, uh and drive profitability and cash flow. Cannabis market, another key aspect, we're not just looking at the market, we're deconstructing where it is in its evolution because we know as more competition comes into play, there'll be continued price compression which squeezes margins. In particular, we focus on what's called limited licensed states. So, as an example, if you were in California and you wanted to buy a bottle of vodka, you could go to a supermarket and buy wine or vodka. You're in Pennsylvania, you have to go to a staterun package store and you can only buy it at a limit limited number of locations. It's states like that that limit the number of licenses that we focus on. Think Pennsylvania, Illinois, Ohio to name a few. In these states, if you just think about it for a moment, if you have less competition, you should have better margin. you have better margin, you have better cash flow, it's a better credit profile for us to have the tenant. Number two, if you have a limited number of licenses, those licenses tend to I'm going to really pick it up because I want to get to Q&A. Those licenses tend to have, thank you for that, tend to have intrinsic value. So, if the operator is having difficulty, um they're unlikely to throw you the keys the way they would in say in California. We've seen a lot of defaults in the industry in California. Rather, they sell that business to be able to monetize the value of that license. And depending on the state, that license could have a value of anywhere from 1 million to 10 million. We saw a license a few years ago in New York State sell for $230 million for just a license. Granted, that was the peak. And then um lastly on this page, our full wall coverage. We focus on underwriting cash flow. I used to be a banker at JP Morgan and going into the great financial crisis, the team I ran, we had over $9 billion of credit risk on the books. I spent the next two years with the workout people. We didn't lose a penny on our book, but what I really learned is that the go-to move in financial distress for a CFO, rightly, is to cut off anything that's not generating free cash flow. And we've seen that in spades here in the cannabis industry. So, we really focus on underwriting the properties we're investing in to make sure that they'll be able to persist in providing cash flow to the tenants because if they're providing free cash flow to the tenants, there should be no reason for them uh to want to turn back the facility. I am going to skip over uh couple of points I'd like to make here. Our dividend yield, I haven't seen where we're trading in the last 48 hours. I've been traveling, but our dividend yield is running, this was 123, we're around 13%. Um, typical REITs trade at uh 6% dividend yield. So, a lot of people say, "Wait a minute, why are you trading at such a yield premium? Why are you at a 13% yield nearly two times what uh non-cannabis are trading at?" Typically, the investors say it means one of two problems. Either you have a leverage problem or you have a terrible portfolio. Let's talk about leverage. We have 7.6 million of debt outstanding um on a $446 million invested capital. We have a net cash position, 22 million of cash at the end of the last quarter minus the 7 million. So, we have a net cash position. We could pay off the debt tomorrow if we wanted to and still have cash left over. We're generating free cash flow every quarter by having a 79% payout ratio. Our payout ratio is the measure of our free cash flow that's used to cover our dividend. Said differently, on a 79% payout ratio, it means 21% of our revenue can go away and we can still cover paying the dividend of 43 cents a quarter. Um, and so it's not a it's not a debt problem on our uh on our business. So maybe it's a portfolio problem. Well, I just talked about our top three investors. I talked about the fact that we have 79% payout ratio. You know, one of our competitors is well over 100%. Well, now your dividend's really at risk. Um, so we could lose 20% of our portfolio and still cover the dividend. So, Anthony, if it's not the yield, excuse me, if it's not your debt and it's not your portfolio, then why the heck are you trading like this? We trade on the OTC. We comply in all respects to qualify for New York or NASDAQ listing, but we focus on the cannabis sector, so they won't list us. One of our competitors is grandfathered on the stock exchange. They they were listed before um before the rules changed. Uh so, it's a meaningful disadvantage. And if you're not on New York or NASDAQ and you focus on the cannabis sector, custody restrictions exist in the US. So prime brokers for for the hedge funds and all the long only investors think JP Morgan, Goldman Sachs, Persing, Bank of New York, they will not custody our stock. So that really puts a limit on the institutional bid for our stock. But there in lies the opportunity for those that can solve custody. We think you get paid a very handsome yield while you're waiting for the catalyst of federal reform to really allow us to get the uplifting um and resume the very rapid growth pace that we experienced um up until 2023. Let me pause there and open it up for questions. That's the most fun part of it. I see a hand moving. Yes. Can you say that again? just buildings. So, it's it's the um we're not doing any farmland. All of our buildings are industrial-grade buildings in the back. >> Yeah, that's one of the difficulties. We have no statements out of the new DEA administrator. Um, for those that don't know, the new DEA administrator was uh confirmed by the Senate in late July and started his job in late July. He's not come out and said anything or any position. In his testimony to the Senate in May, he said it would be one of his top priorities, but he's not made a uh a statement on it yet. We do. We do. We will. So, our deals are are primarily Thank you. our deals are primarily three types. Um, number one, we'll do a build to suit. We'll acquire the property for a tenant. Um, we enter into a long-term lease immediately and then we provide the funding for the construction of the building. We did that on a facility in Arizona in Phoenix, um, where we completed a $15 million project about a year ago. The second way we do it is we'll buy an existing building and we'll provide TI for a retrofit. Um, and we've done that before. We we're doing two deals right now uh for dispensaries where they're existing buildings and they're being retrofitted to dispensaries. Um and then the third way is we'll buy a fully complete and operational building um one that's been up and running. We're seeing fewer of those today because most of the operators monetize their existing uh portfolio back in the 21 to 23 range. No, not it. But the do what I call the domino effect will all rescheduling rescheduling does two things. Let me start with what it doesn't do. It does not legalize it in the US. In the US we have a schedule of controlled substances when number one as I said is fentanyl cocaine. Number three would be Tylenol with codine. Doesn't mean anybody could just manufacture and sell Tylenol with codine. means you have to have a DEA license to do that. Will operators in the industry apply for a DEA license? I think that's going to be really difficult because very few are medical only. Most of them operate in states that also have adult use. So now you're on schedule 3. It also eliminates 280E. Within the Internal Revenue Code in the US, we actually say that you could sell fentanyl. You can Well, we don't say you could sell if you sell illegal drugs. If you sell drugs on a schedule illegally and it's on schedule one and two, doesn't say anything about below, just one and two, you can only deduct cost of goods sold. Um, you can't deduct interest expense and everything else. So, as a result, the US industry is paying effective tax rates of 50 to 60% depending on how you've organized your business. So moving to schedule three improves the future cash flow profile of the entire industry and improves the credit quality of our entire um book of business because all of our tenants get that improved cash flow. Let's get to your question about uplifting. Um what I think it does from a domino effect, you get rescheduling to three. I think the safer banking act is likely to then happen within the safer banking act. There'll be safe harbors for not just banks but also for exchanges. Once that safe harbor is in place, then that'll be the application we'll put in to uplist. And since we already operate the business to qualify, it'll be a matter of weeks would be the expectation. But you do need to to circle back. You do need the domino to fall to get safer banking passed. I'm not giving up any time here. Um let's talk a little bit about if you if you think of a question please raise your hand. This is my favorite but my most depressing slide and it's how we are against our peers both our equity reap peer as well as our um mortgage rate peers. Uh, this is a little bit dated now. Um, but I think we're very undervalued. Again, when I think about a 13% dividend yield with significant coverage, um, and the opportunity to to manage through any sort of additional uh, issues that are in the portfolio and at a 12.7% topline yield, we're not getting paid 400 to 500 basis points of premium over non-cannabis real estate because we're not taking risk. So, we will have issues in the portfolio. I think we're well paid for it and I think we've got the cushion in our AFO uh to be able to maintain that dividend um and and get that catalyst since we're trading so far below book. Really get that catalyst um uh passed in terms of rescheduling and then safer banking and uplisting and be able to ride the wave back up. in the back. I would love to. And you probably don't hear a lot of people saying, "I'd love to put debt on." We're unlevered. We're under um you know, putting my banker my banker hat on. We're underutilizing debt. We're over capitalized. And from a capital efficiency perspective, we should be using the lower cost capital debt to scale up the business and get better yield to our investors. I just need the quality opportunities to invest in. Anybody wants to go back and look at what I've been saying since we IPOed in 21, we're going to grow for quality growth, not for growth growth's sake. Our largest competitor has I think over 30% of their def their portfolio is defaulted. It's because in my opinion, they reached for growth. Um, and we were getting we were getting hit for it two three years ago. But I think the quality of our portfolio proves out that thesis. as opportunities present themselves, we'll use that to fund it. >> Yes. Yes. Zero interest in issuing that zero. Way too dilute. Would not do that. And I'm I'm a fairly large shareholder myself. Our board and our management team, and I've got to end it now. Board and management team uh represent about 6% of uh of the shares. And if you include some of the inside foundational shareholders, we're over a third of the shares. Thank you everybody. Have a great day.